Key Hole Accounting: Rail Fares – Fair Reasoning or Loco Motives?

Running a car can really rack up the costs; it’s not just petrol that you need to pay for (£1,000 +), there’s car insurance (£350), service and MOT (£200+), tax (£150+), and then there are the extra costs that always seem to come around once a year, like new tyres and the such (£200). Let’s say the car is worth a modest £1,000 and we’ve got a grand total of £2,900 per year. Sure, it’s convenient, but I think I’ll stick with a life of public transport; it’s better for the environment and my bank balance, right?

That really depends on how far you travel, but in most cases, rail travel is far more expensive than its four-wheeled counterpart in the UK. One study found that train fares between some of the UK’s major cities were much more expensive, with some single train journeys costing £100 more than the equivalent trip via car. In fact, there was only one instance in the report in which the locomotive came out on top – a return ticket between Glasgow and Carlisle, where one would save a whopping £1.11. In one case, a man managed to beat a peak train ticket cost by buying a used car, insuring it for a day, taxing it for six months and paying the petrol costs.

It’s worth noting that passengers are sharing the costs of their journeys, and the government also subsidises rail travel (more on that later). So what exactly is happening with rail prices in the UK? With mayors aiming for pedestrian-only spaces in cities, as well as lowering pollution levels, trains look set to become a vital part of transportation in the future, but rising fares are likely to result in less usage.

Choo-Choo-Choose an Alternative? Good Luck Finding One

Capitalism gave us the toaster, the microwave oven and hair in a can, but, apparently, rail travel in the UK is a problem that’s just too big for the defining monetary system of modern history. Or could it be the UK’s peculiar approach to rail financing that causes these metaphorical leaves on the track? Let’s look in more detail at the false marriage between capitalism and rail financing in the UK.

One key feature of capitalism is the presence of competition between companies; in theory, competing companies should drive down the price of a given product or service to gain market share. The companies are trying to balance production or running costs with profits while ensuring they meet the demand, both in quantity and quality, of the users. If we take this brief (and rudimentary) definition and apply it to the UK rail system, we soon see the wheels have well and truly come off.

UK rail runs in contrast to capitalism in that each rail franchise is subsidised with government money. Similarly, the lack of choice in any region means that the supposed competition exists only during the subsidy bidding process (and that choice is given exclusively to the government). Once a franchise has been established, commuters are stuck with that provider until the end of the contract or until the company decides it has pledged too much for the contract and faces a significant loss (or not large enough profits).

Back to those subsidies; taxpayer money goes into propping up the rail system in the UK, just as it does for repairing roads and creating new biking infrastructures. Reports of rail bosses receiving sizable salaries of nearly £500,000, however, angered both those affected by the poor service of trains and taxpayers that primarily use other forms of transport.

Departures: The EU’s Fourth Railway Package

Now let’s factor in the EU’s fourth railway package – an EU legislation on creating a single European rail area; Nicole Badstuber, researcher in urban transport governance at the London School of Economics and UCL, said: “my reading of the fourth rail package [of 2016] is that it categorically seeks to dismantle incumbent state monopolies in other EU countries.” In the UK, this denationalisation initiative started back in 1993 when with the British Railways Act sought to privatise the railways. Eventually, the state did find their way back into the system when Network Rail took over the infrastructure in 2002 (after another private sector failure). With the fourth railway package, a country’s railway business must be put out for competition; a government department could bid for the contract, but, according to Ms. Badstuber, the fourth package is “definitely designed to create an environment conducive to [complete privitisation].” Irony would have it that some of the winning contractors of British rail franchises are, in fact, national rail companies in other European countries. One such company, Germany’s Deutsche Bahn, charges UK rail customers far more than their German customers. RMT general secretary Mick Cash said: “Not only are British passengers paying the highest fares in Europe but the bulk of the profits raised are being siphoned out of this country to subsidise transport operations across the Continent.”

The inner workings of the UK’s rail financing remains a mystery, but if the government genuinely wants the public to embrace travel via rail, they must curb costs and improve the standard of trains in the UK or face the consequences of potentially losing voter confidence. Could the Conservatives consider nationalisation? They already have; the East Coast franchise was taken back into public hands and, Conservatives may want to sit down for the next bit, it made a £225 million pound profit.

We finish with a tongue-in-cheek suggestion: perhaps the key for the future of public services is to put a begrudging anti-nationalisation party, who knows about business profit, in charge of a grand plan of complete nationalisation!

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